Economic uncertainty, retail tumbles, and employment gains

With a number of retailers reporting disappointing results so far this week, the street has questioned the true strength of the economy. Retailers across the board have blamed economic turbulence, losses in discretionary spending, and fiscal policy for their difficult second quarters. We have seen both the high, the low, and the middle class consumer favorites slump alongside the broad market declines.

Earlier in the week the nation’s largest retailer, Walmart (NYSE:WMT) , reported a sluggish quarter while lowering its guidance for the remainder of the year. The company cited a number of headwinds through the remainder of the year including budget cuts and distorted economic strength. While some consumers have benefited greatly from the rise in asset prices this year, we must not forget the majority of America has avoid the equity space with a ten foot pole, thus has missed the benefits.

However, despite triple digit declines on Thursday, the street was welcomed to some positive economic data. It was reported the number of Americans filing new claims for unemployment benefits fell to a near six-year low last week as inflationary concerns were put to rest. U.S. consumer prices remained largely unchanged in July despite drastically rising prices at the pump. Consumer Price Index rose 0.2% as the cost of goods and services ranging from tobacco to apparel increased slightly. Initial claims for state unemployment benefits dropped by 15,000 to a seasonally adjusted 320,000, the lowest level since October 2007 according to the Labor Department.

Going forward, all eyes will be watching the Federal Reserve’s action in the weeks ahead. While the Federal Reserve may be looking to end the days of historically loose monetary policy, poor economic data and stable inflationary data in the near future may cause Bernanke to rethink his timeline. There is no doubt the Federal Reserve will be pouring over the retail conference calls, unemployment data, and equity performance in an attempt to justify its future action.

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